‘Banks must not profit from the pandemic’

Lawyer representing borrowers tells SC that interest on interest is ‘worse than taking a pound of flesh’

September 03, 2020 03:29 am | Updated 03:29 am IST - NEW DELHI

New Delhi: Indian national flag flies at half-mast at Supreme Court during the seven-day state mourning on demise of former President Pranab Mukherjee, in New Delhi, Tuesday, Sep. 1, 2020. (PTI Photo/Shahbaz Khan) (PTI01-09-2020_000068B)

New Delhi: Indian national flag flies at half-mast at Supreme Court during the seven-day state mourning on demise of former President Pranab Mukherjee, in New Delhi, Tuesday, Sep. 1, 2020. (PTI Photo/Shahbaz Khan) (PTI01-09-2020_000068B)

Circulars issued by the RBI on August 6 and hailed by the government in the Supreme Court came under intense criticism from individual borrowers and commercial sectors across the spectrum who called it “old wine in a new bottle”.

The circulars allow individual banks discretion to resolve COVID19-related stress and customise relief to individual borrowers facing the reality of payment of accrued loan interest post the moratorium period.

Appearing before a Bench led by Justice Ashok Bhushan on Wednesday, senior advocate Rajiv Dutta said asking borrowers to pay interest on interest accrued during the moratorium period which expired on August 31 is “worse than taking a pound of flesh”.

“I [borrowers] did not default on the loans. Moratorium on EMI was meant as a respite when cash flow is strapped. How can the banks say it is a loss for them? When the country is down under, the banks want to make a profit? This is worse than taking a pound of flesh. Profit of COVID? Give me time to restore my finances, stand up on my legs,” Mr. Dutta appearing for the borrowers community contended.

Mr. Dutta said the RBI is “not an agent of the banks, only a regulator”.

Senior advocate K.V. Vishwanathan, for the power and real estate sectors, said the government and the RBI were going in circles without addressing proportionality and waiver of interests required in an “extraordinary force majeure situation” like the pandemic.

Nerve centre

He said the sectors he represents form the nerve centre of the economy. The moratorium has only postponed the burden.

Senior advocate Ranjit Kumar, for the Shopping Centres Association of India, asked whether the computer-managed banking system has already rendered the loan accounts NPAs with the moratorium having expired on August 31.

Senior advocate Kapil Sibal, for the construction sector, sought a complete waiver of interest for the moratorium period.

Solicitor General Tushar Mehta, for both the Centre and the RBI, said a variety of banks are dealing with a variety of loans and borrowers. The thrust is to revive the economy and sectors. He said the majority of the economy runs on small businesses.

The court will continue the hearing on Thursday.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.